9911796707
TMI Blog2021 (7) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... solitary issue urged in both the years is whether the Ld. CIT(A) was justified in confirming the disallowance of loss claimed by the assessee on the reasoning that the assessee has not set up its business. 2. The facts relating to the issue are stated in brief. The assessee herein is a joint venture company formed with the purpose of undertaking the business of exploration of minerals. The Ld A.R submitted that the assessee company was incorporated in the year 2006. The company was jointly formed by M/s. Indo-Gold Limited, Australia and M/s Metal mining India Pvt. Ltd. The former one is a foreign company and the later one is a domestic company. 3. The assessee has not started commercial production, i.e., extraction of minerals during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first obtain reconnaissance license from the Government for exploring availability of minerals in a particular area. He submitted that one of the shareholders M/s. Metal Mining India Ltd. had obtained reconnaissance license way back in the year 2005 itself. He submitted that the exploration and extraction minerals is a long process and hence the assessee should be considered as having set up its business, once the office is set up and application for license is filed. The Ld. A.R. further submitted that the assessee has declared loss in the past years also and the return of income filed for those years have been accepted u/s 143(1) of the Act. Only during the two years under consideration, the A.O. has raked up the issue of setting up of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the assessee has not proved that it has set up of the business. 8. We heard the rival contentions and perused the record. As noticed earlier, the provisions of section 35E of the Act deals with the claim for deduction of expenditure incurred on prospecting of minerals. According to this section, all revenue expenditure incurred in the year of commencement of commercial production and within 4 years immediately preceding that year is allowed to be amortized in 10 years. We notice that neither the AO nor the Ld. CIT(A) has examined the applicability of provisions of section 35E of the Act to the facts of the present case. Ld. A.R., however, submitted that the provisions of section 35E of the Act only deals with the expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, then only the activity of extraction of minerals would start, that too, if it is viable to undertake those activities. Hence generation of revenue, as observed by the tax authorities, should not be the criteria for determining the date of setting up of business. The fact that the generation of revenue would take several years is well recognized in sec.35E of the Act, which provides for amortization of expenses incurred in previous four years preceding the year of commercial production. 11. We notice from the financial statements that the assessee has employed personnel and has started exploration activities. The reconnaissance license has been obtained by one of the shareholders of the assessee company. Hence, there appears to be merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs or normal provisions of the Act should apply appears to be a debatable one. 13. At the time of hearing of cases, the bench proposed to restore the matter to the file of the AO for examining entire issue afresh in terms of sec.35E of the Act. Both the parties agreed to the same. Even if the contention of the assessee that normal provisions of the Act should apply to both the years under consideration is accepted for a moment, considering the fact that the assessee has lost its eligibility to claim for set off of brought forward of losses of both the years under consideration, we are of the view that no useful purpose would be served by remitting the matter to the file of the AO, since it would be only an academic exercise. Hence we leave ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
